(Reuters) -U.S. stock index futures fell on Monday, as President Donald Trump’s attacks on Federal Reserve Chair Jerome Powell sparked worries about the central bank’s independence, rattling investors already grappling with an escalating trade war.
On Friday, White House economic adviser Kevin Hassett said that Trump and his team would study whether firing the Fed Chair was an option.
That followed Trump’s comments on Thursday that Powell’s “termination cannot come fast enough,” as the President renewed his calls for more interest rate cuts.
The continued attacks on Powell increased worries about the Fed’s independence and the path of monetary policy in the world’s largest economy, hitting investor confidence in U.S. assets already diminished by Trump’s sweeping changes to trade policy.
Stock futures dropped as investors returned from the Good Friday market holiday, while the dollar slid against major peers on Monday and safe-haven gold jumped. [MKTS/GLOB] [FRX/]
“While monetary policy is a relatively blunt weapon, it can be wielded to control medium-term inflation. This depends on trust in the central bank,” said Paul Donovan, chief economist, UBS Global Wealth Management.
“Building that trust takes years. Losing that trust can happen overnight.”
At 5:05 a.m. ET, Dow E-minis were down 362 points, or 0.92%, S&P 500 E-minis were down 56.5 points, or 1.06%, and Nasdaq 100 E-minis were down 214.75 points, or 1.17%.
Futures for the economically sensitive small cap Russell 2000 lost 0.9%, while the CBOE Volatility Index rose more than 3 points.
After the weekend, traders are pricing in nearly a full percentage point of rate cuts from the Fed this year. However, rates are broadly expected to remain unchanged at the next meeting, as per LSEG data.
Tariff concerns continued to feature prominently on investor radar, after China warned countries against striking a broader economic deal with the U.S. at its expense.
Policymakers, including the Fed chair, have recently flagged how tariff uncertainty was clouding their outlook and potentially adding to price pressures, while dampening growth. However, Trump has repeatedly called for lower interest rates.
The uncertainty over trade and monetary policies has hit stocks hard this year, with Wall Street’s major indexes in the red on a year-to-date basis. The S&P 500 is down more than 10% this year and 14% from its record high.
Company results will be keenly watched this week for clues on how corporations are navigating uncertainty, with Tesla and Alphabet kicking off earnings for the “Magnificent Seven” group of megacap stocks, which powered a record-breaking rally on Wall Street last year.
Netflix shares rose 3% in premarket trading after the streaming giant’s upbeat revenue outlook despite possible economic turbulence.
(Reporting by Lisa Mattackal in Bengaluru; Editing by Anil D’Silva)
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